-Product revenues of $1.72 billion, a 14%
increase compared to Q1 2020-
- Company advancing clinical programs in six
additional diseases beyond cystic fibrosis-
-Multiple Phase 2 proof-of-concept study
results expected in 2021 -
Vertex Pharmaceuticals Incorporated (Nasdaq: VRTX) today
reported consolidated financial results for the first quarter ended
March 31, 2021 and reiterated full-year 2021 guidance for product
revenues.
"In CF, our goal is that all eligible patients have access to
and can benefit from CFTR modulators. In the first quarter, we
continued to make significant progress towards this goal, and in so
doing again delivered strong revenue and earnings growth,” said
Reshma Kewalramani, M.D., Chief Executive Officer and President of
Vertex. "Beyond CF, we have also seen continued significant
progress across our broad pipeline, including advancement of VX-548
to Phase 2 in acute pain, initiation of the Phase 1/2 clinical
trial with VX-880 in type 1 diabetes and completion of enrollment
and dosing in our Phase 2 proof-of-concept study with the AAT
corrector, VX-864. The recent amendment of our agreement with
CRISPR Therapeutics for the CTX001 program further enhances our
leadership position in cell and genetic therapies and we look
forward to completing enrollment of our ongoing trials for CTX001
in sickle cell disease and beta thalassemia this year and bringing
this first-in-class treatment to patients with these devastating
diseases as soon as possible.”
First-Quarter 2021 Financial
Highlights
Three Months Ended March
31,
%
2021
2020
Change
(in millions, except per share
amounts)
Product revenues, net
$
1,723
$
1,515
14
%
TRIKAFTA/KAFTRIO
$
1,193
$
895
SYMDEKO/SYMKEVI
$
125
$
173
ORKAMBI
$
219
$
234
KALYDECO
$
186
$
213
GAAP Operating income
$
888
$
720
23
%
Non-GAAP Operating income
$
1,003
$
877
14
%
GAAP Net income
$
653
$
603
8
%
Non-GAAP Net income
$
781
$
674
16
%
GAAP Net income per share -
diluted
$
2.49
$
2.29
9
%
Non-GAAP Net income per share -
diluted
$
2.98
$
2.56
16
%
Product revenues increased 14% compared to the first
quarter of 2020, primarily driven by the uptake of KAFTRIO in
Europe and continued performance of TRIKAFTA in the U.S. Net
product revenues in the first quarter of 2021 increased 6% to $1.25
billion in the U.S. and increased 43% to $470 million outside the
U.S., compared to the prior year.
GAAP and non-GAAP net income increased compared to the
first quarter of 2020, largely driven by strong growth in total
product revenues.
Cash, cash equivalents and marketable securities as of
March 31, 2021 were $6.9 billion, an increase of $265 million
compared to $6.7 billion as of December 31, 2020 primarily driven
by strong revenue and profitability offset by the repurchase of our
common stock authorized under our stock repurchase plan.
First-Quarter 2021
Expenses
Three Months Ended March
31,
2021
2020
(in millions)
Combined GAAP R&D and SG&A
expenses
$
648
$
631
Combined Non-GAAP R&D and SG&A
expenses
$
530
$
477
GAAP R&D expenses
$
456
$
449
Non-GAAP R&D expenses
$
379
$
337
GAAP SG&A expenses
$
192
$
182
Non-GAAP SG&A expenses
$
151
$
140
GAAP income taxes (1)
$
168
$
55
Non-GAAP income taxes
$
207
$
184
GAAP effective tax rate
20
%
8
%
Non-GAAP effective tax rate (1)
21
%
21
%
Combined GAAP and Non-GAAP R&D and SG&A expenses
increased compared to the first quarter of 2020, primarily due to
the expansion of Vertex's pipeline in CF and other disease areas
and incremental investment to support the global launches of
Vertex's medicines.
GAAP income taxes and the GAAP effective tax rate
increased compared to the first quarter of 2020 due a non-recurring
discrete tax benefit recognized in the first quarter of 2020 and
Vertex's increased operating income.
Non-GAAP income taxes increased compared to the first
quarter of 2020 primarily due to Vertex's increased operating
income.
Full-Year 2021 Financial
Guidance
Vertex today reiterated its full-year 2021 financial guidance,
except for its expectations for combined GAAP R&D and SG&A
expenses, which increased by $900 million as a result of Vertex's
amended collaboration with CRISPR announced in April. Vertex's
guidance is summarized below:
Current FY 2021
Previous FY 2021
Product revenues
Unchanged
$6.7 to 6.9 billion
Combined GAAP R&D and SG&A
expenses (2)
$3.8 to 3.95 billion
$2.9 to 3.05 billion
Combined Non-GAAP R&D and SG&A
expenses (2)
Unchanged
$2.25 to 2.3 billion
Non-GAAP effective tax rate
Unchanged
21% to 22%
Key Business Highlights
Cystic Fibrosis (CF)
Vertex anticipates that achieving new approvals and entering
into additional reimbursement agreements for our current CFTR
modulators will increase the number of CF patients treated with our
medicines and continue to grow our CF business in the years
ahead.
Key progress in 2021 includes:
- New approval received for TRIKAFTA
(elexacaftor/tezacaftor/ivacaftor and ivacaftor) in Australia for
people with CF ages 12 years and older who have at least one
F508del mutation.
- Post-marketing application filed with the European Medicines
Agency (EMA) for the expanded indication of KAFTRIO
(elexacaftor/tezacaftor/ivacaftor and ivacaftor) to include
children with CF ages 6 through 11 years.
- TRIKAFTA/KAFTRIO is now approved and reimbursed or
accessible in 12 countries outside the U.S., including Denmark,
Germany, Ireland, Israel, Switzerland and the countries within the
UK.
R&D pipeline
Vertex continues to progress a broad pipeline of potentially
transformative small molecule, cell and genetic therapies aimed at
serious diseases. Recent and anticipated progress for key pipeline
programs is noted below:
Beta Thalassemia and Sickle Cell Disease
- In April, Vertex and CRISPR Therapeutics amended their
collaboration for the CTX001 programs in beta thalassemia and
sickle cell disease. Under the terms of the revised agreement,
Vertex will lead worldwide development, manufacturing and
commercialization of CTX001. The revised agreement provides Vertex
with 60% and CRISPR Therapeutics with 40% of program economics. At
closing, CRISPR Therapeutics will receive a $900 million upfront
payment with the potential for an additional $200 million milestone
payment upon CTX001 regulatory approval.
- The CTX001 program employs a non-viral ex vivo CRISPR
gene-editing therapy for the treatment of transfusion-dependent
beta thalassemia (TDT) and sickle cell disease (SCD). This approach
aims to edit a person’s hematopoietic stem cells to produce fetal
hemoglobin in red blood cells, which has the potential to reduce or
eliminate symptoms associated with the diseases.
- Enrollment and dosing are ongoing in the clinical studies for
CTX001 and more than 30 patients have now been dosed to date.
Completion of enrollment in both studies is expected in 2021.
- In April, the European Medicines Agency (EMA) granted Priority
Medicines Designation (PRIME) to CTX001 for TDT. The program has
previously been granted Regenerative Medicine Advanced Therapy
(RMAT), Fast Track, Orphan Drug and Rare Pediatric Disease
designations from the U.S. Food and Drug Administration (FDA) for
both TDT and SCD. CTX001 has also been granted PRIME designation
for SCD and Orphan Drug Designation from EMA for both TDT and
SCD.
Alpha-1 Antitrypsin (AAT) Deficiency
- Vertex is evaluating multiple compounds with the potential to
correct the misfolding of Z-AAT protein in the liver, in order to
increase the systemic levels of functional AAT. Misfolded Z-AAT
protein is the root cause of AAT deficiency and the Vertex small
molecule corrector program targets both the liver and lung
manifestations of the disease.
- Patients enrolled in the Phase 2 proof-of-concept study for the
Z-AAT corrector, VX-864, have completed the 28-day dosing period.
The study includes a 28-day safety follow-up period which is
ongoing, and results are expected in the second quarter of
2021.
APOL1-mediated Kidney Diseases
- Vertex is evaluating the potential of inhibitors of APOL1
function in people with APOL1-mediated kidney diseases, including
focal segmental glomerulosclerosis (FSGS).
- Enrollment is ongoing in a Phase 2 proof-of-concept study
designed to evaluate the reduction in proteinuria in people with
APOL1-mediated FSGS after treatment with VX-147. Results from this
study are expected in the second half of 2021.
Type 1 Diabetes (T1D)
- Vertex is evaluating a cell therapy designed to replace
insulin-producing islet cells in people with T1D. Vertex is
pursuing two programs for the transplant of these
fully-differentiated functional islets into patients: 1)
transplantation of islet cells alone, using immunosuppression to
protect the implanted cells and 2) implantation of the islet cells
inside a novel immunoprotective device.
- In March, the U.S. FDA granted Fast Track Designation and
Vertex initiated a Phase 1/2 clinical trial for VX-880, the islet
cells alone program, in people with T1D.
Pain
- Vertex is evaluating selective small molecule inhibitors of
NaV1.8, a genetically validated, novel target for the treatment of
pain, with the goal of preventing pain signals traveling from the
sensory nerves to the central nervous system. Vertex has previously
demonstrated clinical proof-of-concept with a small molecule
investigational treatment targeting NaV1.8, VX-150, in multiple
pain indications including acute pain, neuropathic pain and
musculoskeletal pain.
- VX-548, a selective NaV1.8 inhibitor, demonstrated favorable
safety, tolerability and pharmacokinetic profiles in Phase 1
studies. In these studies, the molecule exhibited a favorable
profile at doses considerably lower than those required with our
previous NaV1.8 inhibitors.
- VX-548 is expected to advance into Phase 2 proof-of-concept
studies for acute pain in the second half of 2021.
Investments in External
Innovation
- In April, we entered into a research collaboration with
Obsidian Therapeutics, Inc., or Obsidian, aimed at the discovery of
novel therapies that regulate gene-editing for the treatment of
serious diseases. This collaboration enables us to leverage
Obsidian’s cytoDRiVE® platform technology to discover gene-editing
medicines whose therapeutic activity can be precisely controlled
using small molecules.
Non-GAAP Financial
Measures
In this press release, Vertex's financial results and financial
guidance are provided in accordance with accounting principles
generally accepted in the United States (GAAP) and using certain
non-GAAP financial measures. In particular, non-GAAP financial
results and guidance exclude from Vertex's pre-tax income (i)
stock-based compensation expense, (ii) revenues and expenses
related to collaborative milestones and upfront payments, (iii)
gains or losses related to the fair value of the company's
strategic investments, (iv) increases or decreases in the fair
value of contingent consideration, (v) acquisition-related costs
and (vi) other adjustments. The company's non-GAAP financial
results also exclude from its provision for income taxes the
estimated tax impact related to its non-GAAP adjustments to pre-tax
income described above and certain discrete items. These results
should not be viewed as a substitute for the company’s GAAP results
and are provided as a complement to results provided in accordance
with GAAP. Management believes these non-GAAP financial measures
help indicate underlying trends in the company's business, are
important in comparing current results with prior period results
and provide additional information regarding the company's
financial position that the company believes is helpful to an
understanding of its ongoing business. Management also uses these
non-GAAP financial measures to establish budgets and operational
goals that are communicated internally and externally, to manage
the company's business and to evaluate its performance. The company
adjusts, where appropriate, for both revenues and expenses in order
to reflect the company's operations. The company’s calculation of
non-GAAP financial measures likely differs from the calculations
used by other companies. A reconciliation of the GAAP financial
results to non-GAAP financial results is included in the attached
financial information.
The company provides guidance regarding combined R&D and
SG&A expenses and effective tax rate on a non-GAAP basis. The
guidance regarding combined GAAP R&D and SG&A expenses does
not include estimates associated with any potential future business
development activities. The company does not provide guidance
regarding its GAAP effective tax rate because it is unable to
forecast with reasonable certainty the impact of excess tax
benefits related to stock-based compensation and the possibility of
certain discrete items, which could be material.
Vertex Pharmaceuticals
Incorporated
First-Quarter Results
Consolidated Statements of
Operations
(in thousands, except per share
amounts)
(unaudited)
Three Months Ended March
31,
2021
2020
Revenues:
Product revenues, net
$
1,723,305
$
1,515,107
Other revenues
1,000
—
Total revenues
1,724,305
1,515,107
Costs and expenses:
Cost of sales
192,329
162,497
Research and development expenses
455,973
448,528
Sales, general and administrative
expenses
192,077
182,258
Change in fair value of contingent
consideration
(3,900
)
1,600
Total costs and expenses
836,479
794,883
Income from operations
887,826
720,224
Interest income
1,465
12,576
Interest expense
(15,678
)
(14,136
)
Other expense, net (3)
(52,653
)
(61,130
)
Income before provision for income
taxes
820,960
657,534
Provision for income taxes
167,822
54,781
Net income
$
653,138
$
602,753
Net income per common share:
Basic
$
2.52
$
2.32
Diluted
$
2.49
$
2.29
Shares used in per share calculations:
Basic
259,369
259,815
Diluted
261,916
263,515
Reconciliation of GAAP to
Non-GAAP Net Income
First-Quarter Results
(in thousands, except per share
amounts)
(unaudited)
Three Months Ended March
31,
2021
2020
GAAP net income
$
653,138
$
602,753
Stock-based compensation expense
115,174
115,706
Decrease in fair value of strategic
investments (3)
52,295
44,870
(Decrease) increase in fair value of
contingent consideration (4)
(3,900
)
1,600
Collaborative revenues and expenses
(5)
650
36,250
Acquisition-related costs (6)
2,820
2,883
Total non-GAAP adjustments to pre-tax
income
167,039
201,309
Tax adjustments (1)
(38,961
)
(129,608
)
Non-GAAP net income
$
781,216
$
674,454
Net income per diluted common share:
GAAP
$
2.49
$
2.29
Non-GAAP
$
2.98
$
2.56
Shares used in diluted per share
calculations:
GAAP and Non-GAAP
261,916
263,515
Three Months Ended March
31,
2021
2020
GAAP operating income
$
887,826
$
720,224
Stock-based compensation expense
115,174
115,706
(Decrease) increase in fair value of
contingent consideration (4)
(3,900
)
1,600
Collaborative revenues and expenses
(5)
650
36,250
Acquisition-related costs (6)
2,820
2,883
Non-GAAP operating income
$
1,002,570
$
876,663
Reconciliation of GAAP to
Non-GAAP Revenues and Expenses
First-Quarter Results
(in thousands)
(unaudited)
Three Months Ended March
31,
2021
2020
GAAP total revenues
$
1,724,305
$
1,515,107
Collaborative revenues
(1,000
)
—
Non-GAAP total revenues
$
1,723,305
$
1,515,107
Three Months Ended March
31,
2021
2020
GAAP cost of sales
$
192,329
$
162,497
Stock-based compensation expense
(1,431
)
(1,361
)
Non-GAAP cost of sales
$
190,898
$
161,136
GAAP research and development
expenses
$
455,973
$
448,528
Stock-based compensation expense
(72,802
)
(72,687
)
Collaborative expenses (5)
(1,650
)
(36,250
)
Acquisition-related costs (6)
(2,820
)
(2,678
)
Non-GAAP research and development
expenses
$
378,701
$
336,913
GAAP sales, general and administrative
expenses
$
192,077
$
182,258
Stock-based compensation expense
(40,941
)
(41,658
)
Acquisition-related costs (6)
—
(205
)
Non-GAAP sales, general and
administrative expenses
$
151,136
$
140,395
Combined non-GAAP R&D and SG&A
expenses
$
529,837
$
477,308
Three Months Ended March
31,
2021
2020
GAAP other expense, net
$
(52,653
)
$
(61,130
)
Decrease in fair value of strategic
investments (3)
52,295
44,870
Non-GAAP other expense, net
$
(358
)
$
(16,260
)
GAAP provision for income taxes
$
167,822
$
54,781
Tax adjustments (1)
38,961
129,608
Non-GAAP provision for income taxes
(7)
$
206,783
$
184,389
GAAP effective tax rate
20
%
8
%
Non-GAAP effective tax rate (7)
21
%
21
%
Condensed Consolidated Balance
Sheets
(in thousands)
(unaudited)
March 31, 2021
December 31, 2020
Assets
Cash, cash equivalents and marketable
securities
$
6,923,968
$
6,658,897
Accounts receivable, net
977,551
885,352
Inventories
298,863
280,777
Property and equipment, net
986,123
958,534
Goodwill and intangible assets
1,402,158
1,402,158
Deferred tax assets
815,890
882,779
Other assets
710,506
683,311
Total assets
$
12,115,059
$
11,751,808
Liabilities and Shareholders'
Equity
Accounts payable and accrued expenses
$
1,659,876
$
1,560,110
Finance lease liabilities
572,856
581,476
Contingent consideration
185,700
189,600
Other liabilities
716,373
733,807
Shareholders' equity
8,980,254
8,686,815
Total liabilities and shareholders'
equity
$
12,115,059
$
11,751,808
Common shares outstanding
258,829
259,890
Notes and Explanations
1: In the three months ended March 31, 2021 and 2020,
"Tax adjustments" primarily related to the estimated income taxes
related to non-GAAP adjustments to pre-tax income including (i)
stock-based compensation (including an adjustment for excess tax
benefits related to stock-based compensation), (ii) decreases in
the fair value of the company's strategic investments and (iii)
collaborative milestone payments. In the three months ended March
31, 2020, "Tax adjustments" also included a non-recurring discrete
benefit to the company's provision for income taxes of $50.4
million, relating to the write-off of a long-term intercompany
receivable, that the company excluded from its Non-GAAP
measures.
2: The company's increased combined GAAP R&D and
SG&A expenses guidance reflects the expected effect upon
closing of the company's contemplated transaction with CRISPR,
which was announced in April 2021. The difference between the
company’s full-year 2021 combined GAAP R&D and SG&A
expenses and combined non-GAAP R&D and SG&A expenses
guidance relates primarily to $1.12 billion to $1.17 billion of
R&D expenses related to existing and contemplated collaboration
agreements and $430 million to $455 million of stock-based
compensation expense. The guidance regarding combined GAAP R&D
and SG&A expenses does not include estimates associated with
any potential future business development activities other than the
company's contemplated transaction with CRISPR.
3: "Other expense, net" includes net losses related to
changes in the fair value of the company's strategic investments
and from sales of certain investments.
4: During the three months ended March 31, 2021 and 2020,
the change in the fair value of contingent consideration relates to
potential payments to Exonics Therapeutics' former equity
holders.
5: "Collaborative revenues and expenses" in the three
months ended March 31, 2021 and 2020 primarily related to
collaborative milestone payments.
6: "Acquisition-related costs" in the three months ended
March 31, 2021 and 2020 related to costs associated with the
company's acquisition of Exonics Therapeutics in 2019.
7: The company released its valuation allowance on the
majority of its net operating losses and other deferred tax assets
as of December 31, 2018. As of December 31, 2020, the company had
utilized substantially all of its remaining federal net operating
losses. As a result, a larger portion of the company’s tax
provision will represent a cash tax payable beginning in 2021,
subject to continued utilization of certain tax credits.
Note:
Amounts may not foot due to rounding.
About Vertex
Vertex is a global biotechnology company that invests in
scientific innovation to create transformative medicines for people
with serious diseases. The company has multiple approved medicines
that treat the underlying cause of cystic fibrosis (CF) — a rare,
life-threatening genetic disease — and has several ongoing clinical
and research programs in CF. Beyond CF, Vertex has a robust
pipeline of investigational small molecule medicines in other
serious diseases where it has deep insight into causal human
biology, including pain, alpha-1 antitrypsin deficiency and
APOL1-mediated kidney diseases. In addition, Vertex has a rapidly
expanding pipeline of genetic and cell therapies for diseases such
as sickle cell disease, beta thalassemia, Duchenne muscular
dystrophy and type 1 diabetes mellitus.
Founded in 1989 in Cambridge, Mass., Vertex's global
headquarters is now located in Boston's Innovation District and its
international headquarters is in London. Additionally, the company
has research and development sites and commercial offices in North
America, Europe, Australia and Latin America. Vertex is
consistently recognized as one of the industry's top places to
work, including 11 consecutive years on Science magazine's Top
Employers list and a best place to work for LGBTQ equality by the
Human Rights Campaign. For company updates and to learn more about
Vertex's history of innovation, visit www.vrtx.com or follow us on
Facebook, Twitter, LinkedIn, YouTube and Instagram.
Special Note Regarding Forward-Looking Statements
This press release contains forward-looking statements as
defined in the Private Securities Litigation Reform Act of 1995,
including, without limitation, Dr. Kewalramani's statements in this
press release, the information provided regarding future financial
performance and operations, the section captioned "Full-Year 2021
Financial Guidance" and statements regarding (i) anticipated
regulatory filings, data submissions, and approvals, (ii)
anticipated future label expansions, (iii) the expectations,
development plans and anticipated timelines for the company's
medicines, drug candidates and pipeline programs, including
clinical site activations, patient enrollment, and data
availability, (iv) expectations for the collaborations with CRISPR,
including expectations regarding completion of enrollment in the
CTX001 clinical studies and anticipated benefits of the
collaborations, (v) expectations for uptake of and expanded access
to the company’s medicines, including additional reimbursement
agreements, (vi) expectations for an increase in the number of CF
patients treated with our medicines, (vii) expectations for VX-548,
including our plans to advance VX-548 into Phase 2 proof-of-concept
studies in the second half of 2021, (viii) expectations for the
transactions contemplated by the amended collaboration with CRISPR,
including satisfaction of closing conditions, antitrust clearance,
anticipated upfront and milestone payments to CRISPR, and
anticipated future activities of the parties, (ix) expected effect
on our expenses upon the closing of the transaction contemplated by
the amended collaboration with CRISPR, and (x) anticipated
investment in internal and external innovation. While Vertex
believes the forward-looking statements contained in this press
release are accurate, these forward-looking statements represent
the company's beliefs only as of the date of this press release and
there are a number of risks and uncertainties that could cause
actual events or results to differ materially from those expressed
or implied by such forward-looking statements. Those risks and
uncertainties include, among other things, that the company's
expectations regarding its 2021 product revenues, expenses and
effective tax rates may be incorrect (including because one or more
of the company's assumptions underlying its expectations may not be
realized), that COVID-19 may have different or more significant
impacts on the company's business or operations than the company
currently expects, that the closing of the transaction contemplated
by the amended collaboration with CRISPR may not occur in a timely
manner, or at all, that data from preclinical testing or early
clinical trials, especially if based on a limited number of
patients, may not be indicative of final results, that the company
may not realize the anticipated benefits from our collaborations
with third parties, that data from the company's development
programs may not support registration or further development of its
potential medicines in a timely manner, or at all, due to safety,
efficacy or other reasons, and other risks listed under the heading
“Risk Factors” in Vertex's annual report and subsequent quarterly
reports filed with the Securities and Exchange Commission and
available through the company's website at www.vrtx.com and on the
SEC’s website at www.sec.gov. You should not place undue reliance
on these statements. Vertex disclaims any obligation to update the
information contained in this press release as new information
becomes available.
Conference Call and
Webcast
The company will host a conference call and webcast today at
5:30 p.m. ET. To access the call, please dial (866) 501-1537 (U.S.)
or +1 (720) 545-0001 (International). The conference call will be
webcast live and a link to the webcast can be accessed through
Vertex's website at www.vrtx.com in the "Investors" section under
"Events and Presentations." To ensure a timely connection, it is
recommended that users register at least 15 minutes prior to the
scheduled webcast. An archived webcast will be available on the
company's website.
(VRTX-E)
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version on businesswire.com: https://www.businesswire.com/news/home/20210429006057/en/
Investors: Michael Partridge, 617-341-6108 or Brenda
Eustace, 617-341-6187 or Manisha Pai, 617-429-6891
Media: 617-341-6992 mediainfo@vrtx.com
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